A group of 17 Republican members of the House Financial Services Committee have sent a letter to CFPB Director Chopra regarding the CFPB’s credit card late fees proposal.

The concerns raised by the lawmakers in the letter include the following:

• Commenting on the CFPB’s failure in 2022 to adjust the Regulation Z late fee safe harbor amounts for inflation, the lawmakers note that the CFPB “has yet to explain or justify why there was not an increase in the most recent annual adjustment announcement –a striking lack of transparency and accountability, and especially so in an era of outsized inflation.”
• The proposal will force credit providers “to offset lost income and potential account charge-offs by increasing interest rates for all borrowers (i.e., socialize the cost of late and defaulting borrowers) or limiting extension of unsecured credit to borrowers with low credit scores.”
• The CFPB did not give appropriate consideration to the proposal’s likely impact on consumer behavior given that late fees “provide incentives for customers to pay on time and discourage repeat underpayments or lack of payments.”  If consumers face only a maximum $8 late fee, “it is highly likely that timely payment rates will decrease as borrowers see little downside for late payments.”  This will mean “more shifting of delinquent payment costs to other, innocent, consumers who absorb the associated costs through higher rates or inability to further access unsecured credit that they may need to smooth their consumption.”
• The CFPB has not complied with the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA).  In light of the proposal’s economic impact on small banks and credit unions with less than $850 million in assets, the CFPB is required to convene a SBREFA panel.

The letter concludes with a series of questions to which the lawmakers request responses by March 15, 2023.  Their questions focus on the CFPB’s economic, quantitative, or market analyses underlying the proposal and its projected impacts. The lawmakers also ask the CFPB about its communications and coordination with the Biden Administration and/or other federal agencies in the development of the proposal.

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